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How Online Contracting Can Maximize Hotel Revenue

The rapid growth of e-mail and online reservations services has proved a boon to hotels worldwide, giving even small establishments access to global markets. The ease of discovering new travel venues through the Internet, along with the growing unpredictability of airline pricing, climate, and political situations, often results in dramatic shifts in tourism industry demographics, with some destinations experiencing unexpected surges in arrivals during what were formerly periods of low demand.
Unfortunately, because of the nature of the hospitality industry, most hotels are not able to enjoy the benefits of this booming market. Since an hotel room unoccupied for a night is revenue forever lost, to ensure adequate year-round occupancy levels most hotels must enter into fixed-term contracts with wholesalers and large agencies to supply a certain number of room nights at discounted rates. A recent survey of two hundred hotels in Asia and Europe revealed that the contribution from travel agents and corporate clients ranges from 30% to 70% of total bookings.

But allotting blocks of rooms for exclusive use by major suppliers often results in hotels having to refuse allotment requests by smaller agents and end-consumers, even though they are willing to premium rates. Online contracting addresses this problem by taking online reservation to the next level, employing advanced database technology to monitor demand and supply, and state-of-the-art Internet security systems to transmit confidential business information between hotels and travel agents or corporate clients. Using the hotel’s own website as a gateway, a hotel can establish secure transaction links with agents and corporate clients throughout the globe. Once the bona fides of a new agent or client has been verified by hotel staff, the system takes over, distributing news of rates and promotions, handling and confirming reservations, and tracking payments and commissions. Since only the hotel can grant access to the system through issuing login/password combinations, the hotel retains full control over system-based transactions at all times.

The instant reservation confirmation and monitoring capabilities offered by online contracting systems allows hotels to share room allotments among large numbers of agents and clients, adjusting allotment shares “on-the-fly” by accepting reservation requests on a “first-come-first-served” basis. Secure transaction technology allows hotels to distribute promotional room rates and other confidential information to hundreds of pre-authorized agents and corporate clients at a fraction of the cost of facsimile or surface mail.

Online contracting has the potential to redefine the hospitality industry. By eliminating the need for numerous intermediaries between hotel and guest, hotels can offer increased service levels and explore new markets, while guests can enjoy better, direct rates and more flexibility in travel arrangements.